Below Are Selected Numbers Extracted from Harnischfeger's Year X2 Financial

question 54

Short Answer

Below are selected numbers extracted from Harnischfeger's Year X2 financial statements (numbers are in thousands). $\begin{array}{|l|c|c|}\hline & \underline{X 2} & \underline{X 1} \\\hline \text { Sales } & \$ 2,887,570 & \$ 2,184,287 \\\hline \text { COGS } & \$ 2,166,775 & \$ 1,671,932 \\\hline \text { Current Assets } & \$ 1,410,250 & \$ 1,213,390 \\\hline \text { Current Liabilities } & \$ 1,077,127 & \$ 723,303 \\\hline\end{array}$

Harnischfeger's Footnote on inventories is as follows (numbers in thousands):
Inventories at October 31 consisted of the following:

$\begin{array}{|l|c|c|}\hline \text { Finished Goods } & \$ 198,160 & \$ 211,555 \\\hline \begin{array}{l}\text { Work in Process and } \\\text { purchased parts }\end{array} & 278,671 & 170,027 \\\hline \text { Raw Materials } & \underline{134,448} & \underline{6106,999} \\\hline &611,279&488,581\\\hline \begin{array}{l}\text { Less excess of } \\\text { current cost over } \\\text { stated LIFO value }\end{array} & \underline{(64,164)} & \mathbf{( 7 2 . 1 8 6 , 5 8 1} \\\hline & \$ 547,115 & \$ 416,395 \\\hline\end{array}$

Inventories valued using the LIFO method represented approximately 56% and 80% of consolidated inventories at October 31, X2 and X1, respectively.
a. Calculate for Year X2:
i) the gross margin percentage
ii) the current ratio
iii) inventory turnover
iv) Estimate the following numbers if Harnischfeger used FIFO for all inventories:
v) the gross margin
vi) the current ratio
vii) nventory turnover
b. Compare your answers in part a) and b) and comment.

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Definitions:

Producing Goods

Producing goods involves the processes and activities of manufacturing or creating products from raw materials for sale.

Noncash Revenues

Revenues earned by a company for which cash has not been received, often recognized through accrual accounting.

Operating Activities

Part of the cash flow statement, these activities relate directly to the trading activities of the business, including the production, sales, and delivery of the company's products and services.

Cash Flows

The net amount of cash being transferred into and out of a business, especially affecting operating, investing, and financing activities.